Question : 11) Refer to Figure 17-14. In the figure above, if : 1244847

 

 

11) Refer to Figure 17-14. In the figure above, if the economy in Year 1 is at point A and expected in Year 2 to be at point B, then the appropriate monetary policy by the Federal Reserve would be to

A) lower interest rates.

B) raise interest rates.

C) lower income taxes.

D) raise income taxes.

 

Figure 17-15

 

12) Refer to Figure 17-15. In the figure above, suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B. Which of the following policies could the Federal Reserve use to move the economy to point C?

A) decrease income taxes

B) increase the required-reserve ratio

C) buy Treasury bills

D) sell Treasury bills

 

Figure 17-16

 

13) Refer to Figure 17-16. In the figure above, suppose the economy in Year 1 is at point A and expected in Year 2 to be at point B. Which of the following policies could the Federal Reserve use to move the economy to point C?

A) decrease income taxes

B) decrease the required-reserve ratio

C) buy Treasury bills

D) sell Treasury bills

 

14) From an initial long-run macroeconomic equilibrium, if the Federal Reserve anticipated that next year aggregate demand would grow significantly slower than long-run aggregate supply, then the Federal Reserve would most likely

A) increase income tax rates.

B) decrease income tax rates.

C) increase interest rates.

D) decrease interest rates.

 

15) Expansionary monetary policy to prevent real GDP from falling below potential real GDP would cause the inflation rate to be ________ and real GDP to be ________.

A) higher; higher

B) higher; lower

C) lower; higher

D) lower; lower

 

Table 17-2

Year

Potential Real GDP

Real GDP

Price Level

          2014

          $14.0 trillion

         $14.0 trillion

           150

          2015

            14.5 trillion

           14.2 trillion

           152

 

16) Refer to Table 17-2. Consider the hypothetical information in the table above for potential real GDP, real GDP and the price level in 2014 and in 2015 if the Federal Reserve does not use monetary policy. If the Fed wants to keep real GDP at its potential level in 2015, it should

A) buy Treasury securities.

B) sell Treasury securities.

C) increase the required reserve ratio.

D) increase income taxes.

 

17) Refer to Table 17-2. Consider the hypothetical information in the table above for potential real GDP, real GDP and the price level in 2014 and in 2015 if the Federal Reserve does not use monetary policy. If the Fed uses monetary policy successfully to keep real GDP at its potential level in 2015, which of the following will be higher than if the Fed had taken no action?

A) real GDP and the unemployment rate

B) real GDP and the inflation rate

C) real GDP and potential GDP

D) potential GDP and the inflation rate

 

Table 17-3

Year

Potential Real GDP

Real GDP

Price Level

          2014

         $14.0 trillion

         $14.0 trillion

           150

          2015

           14.5 trillion

           14.8 trillion

           154

 

18) Refer to Table 17-3. Consider the hypothetical information in the table above for potential real GDP, real GDP and the price level in 2014 and in 2015 if the Federal Reserve does not use monetary policy. If the Fed wants to keep real GDP at its potential level in 2015, it should

A) buy Treasury securities.

B) sell Treasury securities.

C) decrease the required reserve ratio.

D) decrease income taxes.

 

19) Refer to Table 17-3. Consider the hypothetical information in the table above for potential real GDP, real GDP and the price level in 2014 and in 2015 if the Federal Reserve does not use monetary policy. If the Fed uses monetary policy successfully to keep real GDP at its potential level in 2015, which of the following will be lower than if the Fed had taken no action?

A) real GDP and the unemployment rate

B) real GDP and the inflation rate

C) real GDP and potential GDP

D) potential GDP and the inflation rate

 

20) The dynamic aggregate demand and aggregate supply model accounts for the price level rising every year.